New FDI policies create confusion in retail industry

India has so far not allowed any foreign direct investment (FDI) in the multi-brand retail industry, due to internal political opposition to the entry of multinational retail giants. Voices both within and outside government fear that such entry could ruin the livelihood security of small traders and a large number of people who are employed in traditional forms of retail business.

While infusion of 100% FDI in cash and carry (business to business) retail is currently permitted, only 51% FDI is allowed in single-brand retail. FDI in multi-brand retail has been expressly prohibited under FDI policy.

Multi-brand retail giants like Wal-Mart, Carrefour and Tesco have been compelled to either take the franchise route or provide technical (back-end) services only; some have even chosen to wait until the policy is completely changed to meet their requirements.

Shardul Thacker is a partner with Mulla & Mulla & Craigie Blunt & Caroe in Mumbai.